JM Financial has initiated coverage on National Securities Depository Ltd (NSDL) with an ‘Add’ rating. The brokerage house has a target price of Rs 1,290 per equity share. This implies 11.6% upside. Significant cash flows and lower volatility compared to exchanges are some of the key catalysts prompting the investment rationale. JMFL also pointed out that, given the duopoly nature of the industry, depositories deserve premium valuations.
JM Financial on NSDL: Market leadership and dominance in key value metrics
NSDL is the largest depository in India on the basis of several critical measures, including the number of issuers, the number of active instruments, market share in the demat value of settlement volume, and value of assets held under custody. NSDL had a market share of 66% as of FY25 in demat-based transaction settlement value. It has facilitated settlements worth Rs 103.2 lakh crore. Furthermore, it held 86.8% of all securities in dematerialised form by value, with total assets under custody of approximately Rs 464 lakh crore.
JM Financial on NSDL: High-value account and institutional bias
One of the biggest factors contributing to NSDL’s growth is the company’s structurally distinct client base. This is because of a significantly higher proportion of institutional, corporate, and High Net Worth Individual (HNI) investors.
The average value per account at NSDL stood at Rs 1.18 crore as of March 2025, which is almost 25 times higher than CDSL. This institutional dominance results in higher yield stability and lower volatility of its custody value compared to a retail-heavy account base, positioning NSDL as the preferred depository for large-value transactions.
JM Financial on NSDL: Diversified revenue streams
NSDL has successfully evolved from being a pure-play securities depository into a diversified financial infrastructure platform. Its core depository operations accounted for only 44% of total consolidated revenue in FY25, while the remaining 56% came from subsidiaries (NDML and NPBL). This mix of revenue reduces earnings volatility tied to market activity cycles and provides greater visibility to cash flows. NSDL Payments Bank (NPBL) alone contributed 51% of consolidated operating revenue in FY25.
JM Financial on NSDL: Duopoly structure and rising equity markets are beneficial
NSDL benefits directly from the increase in investor participation in equity markets and the trend of financialising household savings in India. The depository sector operates as a natural duopoly, with no new competitors entering since 1999, restricted by strict SEBI regulations and significant barriers to entry. Also, the total number of demat accounts in India has surged at a 27% CAGR from FY17 to FY25.
JM Financial on NSDL: Strong projected financial growth
JM Financial anticipates that NSDL is positioned for sustained future growth, reflecting its strong market position and growth potential in the capital markets. As per the report, the brokerage estimates CAGR in revenue of 11%, EBITDA of 18%, and net profit of 15% over FY25-28. This growth, along with expected operational efficiencies and tech-led scale-up, is anticipated to improve the company’s EBITDA margin.